Doncaster Chamber – Quarterly Economic Survey: Results of the 1st Quarter 2008
Background
The Quarterly Economic Survey was distributed to all businesses in Chamber membership with 79 members, 8%, responding. The results are compiled through the British Chamber network and used by the Treasury Committee of the Bank of England to help determine interest rates. Consequently the results of the survey are of key importance to all members.
Key Points
The key points arising from the Quarterly Economic Survey for Doncaster are as follows:
- Business confidence in Doncaster is plummeting with only 53% of businesses now expecting profitability to increase in the next three months; this is down from 66% in the last quarter of 2007 and 68% in the third quarter. Similarly, only 42% of businesses reported an increase in sales this last three months compared with 50% of businesses in the final quarter of 2007. Furthermore, 13% of Doncaster businesses reported that they had been forced to lay off staff in the first quarter of 2007 compared with only 4% if the final quarter of 2007.
- Interest rates are now putting extreme pressure on Doncaster businesses with 39% of Doncaster businesses citing interest rates as the biggest external pressure on their business success. The move to cut interest rates to 5.00% in April, whilst expected, was not enough and the Chamber is urging the MPC to consider a further cut to 4.75% in May. The ominous warnings in the Bank of England’s recent Credit Conditions Survey highlight the growing risks that the credit crunch may be worsening as evidenced by the worsening cashflow position for a lot of Doncaster businesses. The findings of this research demonstrate that it is vitally important to ensure that problems in the financial sector and in the housing market do not further damage wealth-creating businesses.
- There is however good news for Doncaster’s exporters with 36% of exporters reporting an increase in overseas sales this last quarter compared with only 7% of businesses reporting the same in the last quarter of 2007.
UK Sales
In the last three months sales have increased for 42% of all businesses, remained constant for 41% of businesses and decreased for 18% of businesses compared with only 11% in the last quarter of 2007. Advanced orders have increased for 41% of businesses, remained constant for 46% and dipped for the remaining 14% of businesses. This demonstrates a decline from the final quarter of 2007 when 50% of businesses reported an increase in both sales and advance orders illustrating the pressures now being created by the credit crunch and high interest rates.
The manufacturing sector has shown a small dip contrasting with the small improvement in the final quarter of 2007; 33% reported an increase in sales compared with 44% in the last quarter of 2007, 67% remaining constant; on the positive side no manufacturers reported a decrease in sales.
Export Sales
Export sales have increased in the last three months for 36% of businesses which compares well with only 7% in the last quarter, remained constant for 64% of businesses, with no businesses reporting a decrease in export sales. Advanced export orders have increased for 20% of businesses, remained constant for 75% and decreased for 5% of businesses. These figures demonstrate an improvement for exports compared with the final quarter of 2007 when only 7% reported an increase in export sales.
Export sales within the manufacturing sector are very positive with 67% of businesses reporting an increase and 33% reporting that sales have remained constant in overseas markets. This compares with only 25% of manufacturing businesses reporting an increase in overseas sales in the final quarter of 2007 and 8% in the third quarter.
Employment
Over the last three months 25% of businesses have increased their workforce, for 61% it has remained constant, with 13% of businesses reducing their workforce, this compares with only 4% of businesses laying off staff in the last quarter of 2007. In the next three months 38% of businesses expect to take on more staff, 59% of businesses expect their workforce to remain constant and 3% expect to lose staff.
38% of manufacturing businesses have increased their workforce in the last three months with 50% expecting to recruit staff in the next three months; this shows an improvement on the final quarter of 2007 when only 8% of manufacturing businesses reported that they had recently taken on new staff.
47% of businesses have tried to recruit staff in the last three months compared with 51% in the last quarter of 2007, 55% for the manufacturing sector up significantly from 25% in the final quarter of 2007. 69% of these were full time posts and 63% were for permanent positions.
61% of those businesses trying to recruit staff encountered difficulties when doing so, this figure rises to 75% within the manufacturing sector. This figure is very similar to recent surveys and this reflects the long terms concerns of Doncaster businesses about the local workforce being equipped with the skills they need. These difficulties occurred in relation to the following types of jobs overall: Skilled Manual/Technical –32%, Professional/Managerial – 30%, Clerical – 11% and Semi/Unskilled – 24%.
Cashflow
Over the last three months cashflow improved for 34% of businesses down from 40% in the final quarter of 2007, remained the same 43% of businesses and worsened for 23% of businesses. For the manufacturing sector 32% of businesses had experienced an improvement in cashflow this last three months, 14% experiencing a worsening.
Investment
In the last three months 22% of businesses increased their investment in new machinery/equipment, for 61% this has remained constant, whilst 16% have decreased their investment in machinery/equipment.
Investment plans for training have improved in the last three months for 28% of businesses, remained the same for 67% and decreased for 6%. This reflects a similar commitment to training as was shown by Doncaster businesses in the last two quarters of 2007.
Business Confidence
Business confidence is significantly down from the final quarter of 2007 with 53% of businesses expecting profitability to increase in the next three months compared with 66% in the final quarter of 2007 and 68% in the quarter preceding that. 68% of business expect turnover to improve, 19% expect it to stay the same and 13% expect it to worsen. Confidence in the manufacturing sector is considerably higher with 82% of businesses expecting turnover to increase and 64% expecting profitability to improve, thus demonstrating that manufacturing in South Yorkshire continues to be a beacon as far as the industry is concerned nationally.
Capacity
38% of businesses are operating at full capacity with 62% operating below capacity, this is consistent with the final quarter of 2007. 45% of manufacturing businesses are operating at capacity.
Prices
42% of businesses expect their prices to increase in the next three months, up 5% from the last quarter of 2007, 58% expect them to remain constant and no businesses are predicting a decrease in prices. Within the manufacturing industry 73% of businesses expect prices to increase with 27% expecting them to remain constant.
Businesses are currently experiencing the following price pressures, businesses could respond to more than one option: Pay Settlements – 20%, Raw Material Prices – 46%, Finance Costs – 23% and Other Overheads – 43%. These figures are broadly consistent with the back half of 2007.
For the manufacturing industry figures were as follows: Pay Settlements – 27%, Raw Material Prices – 95%, Financial Costs – 32%, and Other Overheads – 41%.
External Pressures
Businesses were asked to identify what external factors were of concern to them, 39% cited interest rates, 23% cited exchange rates, 27% cited business rates, 20% cited inflation, 32% cited competition and 35% cited corporate taxation as the biggest concern. This again illustrates the growing concern over interest rates.
For the manufacturing sector the breakdown was as follows: Interest Rates – 45%, Exchange Rates – 45%, Business Rates – 18%, Inflation – 18%, Competition – 9%, and Corporate Taxation – 45%.
For further information on the Quarterly Economic Survey please contact Daniel Fell, Head of Policy, on 01302 640113 or dfell@doncaster-chamber.co.uk.